From the course: Developing Business Acumen
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Price strategy
- Pricing is one of the most critical decisions an organization makes. A 1% difference on the top line price is worth a 10% profit increase on a business with a 10% gross margin. For example, if you're selling your product for $100, and you make $10 per unit, that's a 10% margin. If you raise your price by 1%, and go from $100 to $101, that incremental dollar drops straight to the bottom line, so now you go from making $10 to $11, that's a 10 percent improvement on the bottom for a 1% improvement on the top. Pricing has a huge impact on your overall profitability. You need to understand how is your product or service priced? Is it a one time fee? Is it a subscription model? Do you have a razor and blade model where you sell something really cheap, but the replacement parts are an ongoing stream of revenue? Do you sell accessories or extras with your core product? Do you offer additional services or warranties? Different prices for different customers and different markets and features…
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